Buying, Financing or Leasing Solar

Acquiring a solar system for your house is a lot like buying a car. Depending on your financial situation, your decision process may vary. You just need to understand the ramifications of each type of purchase. There are several ways to purchase solar; using cash, financing a loan, or leasing. Each has its pros and cons. 

Purchasing a Solar System with Cash

Pros: Like any purchase, paying cash is usually the cheapest in the long run. You won’t pay any interest, and there are no monthly payments. If you have $15,000 – $25,000 sitting idle in a savings account, you can buy a solar system. Instead of earning interest on your savings, your “return” will be in the form of reduced electric bills. You may be able to offset a $200/month electric bill which equals a “return” of $2,400 / year. This is a great option if you know you will be selling your house. The addition of solar panels may empower you to sell your house for more money.

Cons: You spend a lot of money. At the end of the life of the solar panels, your investment has completely depreciated.

Financing a Loan

If you want to purchase solar system outright but don’t have the cash, you can always finance it.

Pros: Little money out of pocket. You own it, so it will raise the value of the house.

Cons: The loan will show up on your credit. Many lenders will also put a lien on your house. Having a lien on your house can make it difficult to refinance, or difficult for a new buyer to get a loan. You also cannot transfer a loan. You will have to pay off any balance when you sell.

Lease

Pros: Leasing can be a great option for several reasons. You don’t have to put any money down. Leases can be assumed by someone else upon approval. Since the leasing company owns the equipment, they maintain it.

Cons: You may have heard people speaking very poorly about leases. Here’s what you need to know. If you are considering a lease, be absolutely sure they won’t put a lien on your house. See if the debt will show on your credit report. Make sure you can buy the system at any time. This is important if you decide you want to sell your house and avoid having the new buyers qualify to take over the lease. But in most cases they will want to, because they will be saving on their power bill.

Be sure you can also transfer the lease to the new buyers. This could affect their loan application if they are barely qualifying or if their credit is poor.

Hybrid Lease

A hybrid lease is calculated based on the size – and thus cost – of your solar system. It must be sized to your use. The payments are typically compared on a per-kilowatt-hour basis.

Pros: Zero out of pocket cost to get installed. It won’t show up on your credit report (It's billed each month like your electric bill). You save money right away. That's because the price you pay per kWh will be less than SDG&E, and there are no escalating tiers. For example if you use 900 kWh/month your payment will be based on you paying the equivalent of $0.15 – $0.16/kWh for electricity or $135/month. Compared to SDG&E where the average you pay is $0.22/kWh, you bill would be $198/month. That’s because the tiered pricing structure starts out at $.17/kWh but quickly moves up to $.20, $.37 and $.39 which translates to the average consumer paying about $.22/kWh. With solar you won’t pay the higher rates because you won’t get into those upper tiers. There is no lien on your house and the balance does not show up on your credit report. This is great if you want to refinance. You lock in very low price increases. Remember that just two years ago in 2013, SDG&E charged only $.13/kWh for tier 1. In 2015 it is $.17. And the savings should increase over time as utility rates rise.

Cons: Lease buy-outs can be expensive, but this is unlikely event since any buyer of your house should be happy with the low electric bills.